IOTO 2(1)(1), MUMBAI vs. BAKUL INVESTMENT P.LTD, MUMBAI

In the first ground of appeal, the issue raised by the assessee is with regard to confirming the reclassification of leave and license fees earned by the assessee as income chargeable under the head “income from house property” instead of “profit and gains of business or professions” as reported by the assessee in its return of income and the issue raised in ground of appeal no.2 is regarding disallowance of administrative expenses of Rs.5,045,342/- and depreciation expenses of Rs.147,494/- incurred in relation to the business of the assessee. Whereas the issue raised by the revenue in its appeal is against the ld.CIT(A)’s direction to the AO to consider the actual rent received for the purpose of calculation of annual letting value of the properties.

At the outset, the ld. counsel for the assessee submitted before the Bench that the issue involved in these appeals is covered in assessee’s own case by the decision of the co-ordinate Bench of the Tribunal in I.T.A.No.4512/M/2011 (Assessment Year:2001-2002) and others order dated 02.12.2015, wherein the issue has been decided by remitting the 3 and 672/Mum/2015 issue back to the file of the AO to decide the issue afresh in the light of decision of the Hon‟ble Supreme Court in the case of Chennai Properties and Investments Ltd vs. CIT [2015] 373 ITR 673 (SC), dated 9th April, 2015. The ld. DR also fairly appeared to be agreed with the submissions of the ld.AR.

We have carefully considered the rival contentions, perused the material placed before us during the course of hearing including the decisions of authorities below as also the decisions relied upon by the ld. AR. We find that the Co-ordinate Bench of the Tribunal has decided the identical issue in assessee’s own case in (supra) in which the matter has been remitted back to the file of the AO to decide the issue afresh in the light of the decision of the Hon‟ble Supreme Court in the case of Chennai Properties and Investments Ltd (supra). For the sake of brevity, we reproduce the relevant part of the decision as under: “5. During the proceedings before us, relying on the recently pronounced judgment of the Hon‟ble Supreme Court in the case of Chennai Properties and Investments Ltd vs. CIT [2015] 373 ITR 673 (SC), dated 9th April, 2015, Ld Counsel for the assessee submitted that when the company is incorporated for the purpose of earning business income out of the properties, the same would be taxable under the head „profits and gains from the business or profession‟ and not under the head „income from the house property‟. He further submitted that the Hon‟ble Supreme Court reversed the judgment of the Hon‟ble High Court in the said case. Further, Ld Counsel for the assessee submitted that the said judgment being pronounced recently was not available to the authorities below at the relevant point of time. In these circumstances, Ld Counsel for the assessee pleaded for remanding the first issue ie the proper head of income for taxing the income earned from leave and license fees, which is raised in all the AYs under consideration, to the file of the AO for applying the said judgment of the Hon‟ble Supreme Court 4 and 672/Mum/2015 (supra) to the facts of the present case. Further, explaining the same reasoning, Ld Counsel for the assessee submitted that the third issue, which relates to the proper head of income for taxing the income earned from pure leasing to PTI Credit Risk Consultancy Private Limited, raised in the assessee‟s appeals for the AYs 2005-06 to 2008-2009 should also be remanded to the file of the AO for coordinated adjudication of the issue in the light of the ratio laid down by the Apex Court in the above mentioned judgment in the case of Properties and Investments Ltd (supra). The only difference, on facts, between the first and the third issue relates to earning of rental / lease income out of leased furniture / home appliances etc., to PTI Credit Risk Consultancy Services Pvt Ltd. Assessee provided the above furniture at Flat „C‟ of Madhu Kunj, which belongs to a lessee, who is also not a owner.

After hearing both the parties and on perusal of the orders of the Revenue Authorities as well as the cited precedents as well as the relevant material placed before us. On hearing both the parties and the arguments put forth by both the Ld Representatives on both the above mentioned issues (first and third issues) in the assessee‟s appeals for the AYs under consideration, we are of the opinion that the first and the third issues relating to the correct head of income should be remanded to the file of the AO to decide them afresh in the light of the above mentioned judgment of the Apex Court (supra). We order accordingly. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, relevant grounds raised in the assessee’s appeals are allowed for statistical purposes.”